Rupiah Forwards Gain a Second Day as Debt Auction Oversubscribed

By Yudith Ho -
Jan 29, 2013

Indonesia’s rupiah forwards
strengthened for a second day after a government debt auction
attracted bids for 2.3 times the amount on offer.

The Finance Ministry sold 8.5 trillion rupiah ($868 million)
of bonds yesterday with maturities ranging from one to 15 years,
according to a statement on its website. Overseas investors held
272 trillion rupiah of local-currency sovereign notes on Jan. 28,
the biggest holdings since Jan. 4, official data show. The
central bank stepped up intervention in the currency market this
week to reduce the disparity between onshore and offshore rates,
Hendar, executive director for monetary policy, said Jan. 28.

“The bond auction will revive fund inflows as the
oversubscription shows there is still good interest in the
country’s debt,” said Nurul Eti Nurbaeti, Jakarta-based head of
treasury research at PT Bank Negara Indonesia. “The gap between
the rupiah’s onshore and offshore levels will narrow as the
central bank keeps intervening.”

One-month non-deliverable forwards rose 0.1 percent to
9,818 per dollar as of 9:22 a.m. in Jakarta, data compiled by
Bloomberg show. That’s 1 percent cheaper than the spot rate,
which fell 0.4 percent to 9,715, prices from local banks
compiled by Bloomberg show. A daily fixing used to settle the
derivative contracts was set at 9,816 yesterday by the
Association of Banks in Singapore.

Bank Indonesia is aware of “issues” regarding the fixing
set by the association in Singapore and is in talks with policy
makers in Southeast Asia on how to manage them, spokesman Difi
Johansyah said by phone from Jakarta yesterday, after Bank
Negara Malaysia required local lenders to use onshore quotes to
settle the ringgit’s derivative contracts.

The spot rate in the rupiah weakened 0.8 percent in January,
while the forwards were little changed.

One-month implied volatility in the rupiah, which measures
expected moves in exchange rates used to price options, was
unchanged at 6.25 percent.

The yield on the 5.625 percent sovereign bonds due May 2023
held at 5.24 percent, the highest level since Jan. 21, according
to prices from the Inter Dealer Market Association.